Under
AFTA, six members of the Association of Southeast Asian Nations (ASEAN)
cut tariffs on nearly 8,000 items. The six countries include Malaysia,
Indonesia, Singapore, the Philippines, Brunei and Thailand. Four of the
less developed ASEAN nations including Cambodia, Laos, Burma and
Vietnam will have a further period to phase in the tariff cuts.

Bangkok
Post newspaper reported that duties under the ASEAN common effective
preferential tariff (CEPT) scheme have fallen to between zero and 5%
for all products, including those previously deferred on countries’
sensitive and highly sensitive lists. This is good news for ASEAN
countries.

Benefits
from AFTA:

- The elimination of tariffs should
result in product price reductions throughout ASEAN-
Encouraging higher market competition-
Help ASEAN countries' products gain access to a regional market that
incorporates many substantial advantages, e.g. a population of more
than 580 million, $1.5 trillion gross domestic product, convenient
transport systems, huge international trade worth $1.7 trillion a year,
and foreign investment of $60 billion-
Consumers will benefit from cheaper prices of goods given lower tariffs
on a host of raw materials used by the region's producers.-
Some of processing factories are expected to enjoy cheaper imported raw
materials in the face of the tariff elimination, cutting their
production costs-
ASEAN will be integrated into a single market which is an important
point because the market will be stronger and larger with a high
population-
the export and investment sectors will generate higher potential in the
long term

Negative
and Positive Effects:

Import tariffs will fall to zero for a wide range of agricultural
goods, such as onion, garlic, tea, sugar, rice, soybeans, palm oil, and
other farm products tariffs are now eliminated as of January 1, 2010.
The tariff lines under CEPT-AFTA also cover a wide range from finished
consumer products such as air-conditioners; food products such as chili
sauce, fish and soya sauces; intermediate materials such as motorcycle
parts and automobile cylinders; and other products such as iron and
steel, plastics, machinery and mechanical equipment, chemicals and
prepared foodstuffs, paper, cement, ceramics and glass.

Some countries, such as, Thailand, have their products on the
countries' sensitive lists. Those are to carry a 5% tariff and include
coffee beans (down from 20%), copra (from 15%), potatoes (from 10%) and
cut flowers (from 10%). Thailand is concerned about the impact on some
key agricultural products such as rice and palm oil. However, a number
of Thai sectors should gain substantially from the free trade due to a
decline in production costs. They include textiles and garments,
leather products, food products, gems and jewelery, vehicles and parts,
mineral products, and electronics.

The four less developed members of the regional, such as Cambodia,
Laos, Burma and Vietnam will have until 2015 to reduce their tariffs to
0-5% under their AFTA commitments.

For Vietnam, its lower production costs and rising output of rice are
expected to be competitive with Thailand and affect Thailand’s rice
market share. Thailand expects to lose a 0.5% share of the rice trade,
or around $13 million, to Vietnam.

For Malaysia and Indonesia, their palm oil price are more expensive
than that produced from Thailand. The loss of palm oil market share to
Malaysia was forecast at 2.6% or US$46 million because Malaysia is the
world's largest producer and highly efficient. Malaysian producers'
expansion to Indonesia will further lift their productivity.

Therefore, AFTA expansion could affect the Thai economy both negatively
and positively. "But the good would far outweigh the bad", said
Thailand's Prime Minister Abhisit Vejjajiva, according to Bangkok Post
newspaper. He announced that the government had mapped out assistance
measures funded by various ministries and also pledged stringent
import regulations to ensure the quality of farm goods, as well as to
protect Thai consumers. The governments will lose income from tax
collections but in the long term the chances for exports are wider when
compared with countries outside ASEAN. Thus, the nation will benefit
overall.

Experts suggested that for Thailand, the challenge continues to be
upgrading skills and developing products to serve consumer demand,
which will help increase brand awareness, add value and competitiveness
to Thai products in global markets. Mr Dhanin Chearavanont, a leading
food exporter and the Chairman of Charoen Pokphand (CP) Group, also
said recently that the the zero tariff scheme under the ASEAN Free
Trade Area would attract more foreign investors to Thailand. When
compared to other ASEAN nations, Thailand's business environment
remains attractive. He explained that the zero duty on agricultural
products under the AFTA would benefit the country as a whole in the
long run because 95% of products are not taxed. In the short term, some
Thai products would be hit by higher competition from trade
liberalization. Mr Dhanin called on the government to prepare measures
to help affected producers.